What You Need To Know About FHA
Home Loan Purchases

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FHA, or Federal Housing Association, assists home seekers with purchasing their dream home. An FHA loan is a great way for family with a modest income to buy a home. While the rules have gotten stricter in recent years, there are still plenty of opportunities out there. Another thing to remember, most people have better credit than they think, usually Fair Credit or better, keep this in mind while filling out our online form. When contacted by us, kindly ask our loan professional any question you may have. They will be more than happy to assist you in finding the best loan, either conventional or FHA, for your particular circumstance. Remember, all loans don't fit all people; if you need a mortgage loan, we'll find the right one for you.

While the FHA does not provide home loans, they do guarantee repayment to the lenders. This gives the lenders confidence that they will not lose money on the deal, and can offer competitive rates on their mortgages. The same applies if you want to pursue an FHA home refinance, according to HUD.gov.
With an FHA loan, you can spend up to sixty
percent of your pretax income on other debt,
like car payments or credit card
bills. Conventional loans only allow up to
fifty percent. You still have to be able to make the mortgage payment though, so you may not want to cut it too close.

Basic FHA Home Mortgage Loan 203(b) -
What is the purpose of this program?

To provide mortgage insurance for a person
to purchase or refinance a principal
residence. The mortgage loan is funded by a
lending institution, such as a mortgage
company, bank, savings and loan association
and the mortgage is insured by HUD.
Peak Home Loans is a Direct lender.

FHA Loan Limits

Elegibility Requirements And Other Things To Know
About FHA Home Loans / Mortgages

If You Are Thinking Of getting An FHA Loan
for Financing Your Next (or First) Home, Here Are Some Things To Know...

The
borrower must meet standard FHA credit
qualifications such as a FICO Score greater
than 580, although sometimes as low as 500.

The
borrower is eligible for approximately 96.5%
financing.

The
borrower is able to finance the upfront
mortgage insurance premium into the
mortgage.

The
borrower will also be responsible for paying
an annual premium of approximately 0.85% of
the original loan amount per year (divide by
12 for monthly payments).

Require a minimum of 3.5 percent down
payment. That can change depending on your FICO credit score. If
it's below 580, you may have to come up as much as 10 percent.

You can work with state and local
programs to get the down payment, or you can
still use a "gift" from a relative or friend
for the entire 3.5% down payment. This
can work out to a "no out-of-pocket" money
home loan.

Do not be afraid to try with a low credit score. Lenders
such as Peak Home Loans can establish their own minimum score. You may have to go through some more underwriting, and/or have a bigger down payment, but as long as your score is above 500, there are avenues for you.

You need a two year history of on-time bill payments
and you need two years of steady employment.

Eligible properties are one-to-four unit
structures.

Automatic Disqualifications For An FHA Loan Include:

A bankruptcy less than two years old.

A foreclosure less than three years old.

Delinquency on student loans, back taxes or any other type of federal debt.

Advantages of an FHA Loan

1.) Smaller Down
Payment
This is the biggest advantage, an FHA loan will
allow for a minimal down payment of 3.5% of the
home value to put down compared to a
conventional loan where 10-20% is the norm.
Clearly this has a high appeal for borrowers
that cannot afford a traditional down payment.
Side Note: If you combined the FHA loan with a
down payment assistance program, such as CHDAP,
you could be looking at a down payment of .5% to
zero down!

2.) Assistance
Another great thing about the program is having
the ability to use gift funds to cover the down
payment and closing costs. In other words, if
you yourself do not have the 3.5% required down
payment, but your mom, dad, or any other family
member does, and they want to gift it to you,
you are able to use that money.

3.) Pre-Payment Penalty
If you prepay your mortgage before a certain
amount of time, lenders will charge a prepayment
penalty. With an FHA loan there is none. If you
are able to pay your mortgage off before the
full term of the loan, you can do just that.

4.) Credit
Do you have a blemished credit history? No
worries, if your credit is less than perfect, an
FHA loan will accommodate it. Keep in mind, if
you have an abundance of late payments,
foreclosures, bankruptcies, tax liens, or legal
judgments, you might have a harder time
qualifying. The underwriter will be looking for
your overall pattern in your credit behavior ?
if there is an isolated incident exceptions can
be made.

5.) Assumable
One of the most interesting facts about FHA
loans that I found is that an FHA loan is an
assumable loan. What does this mean? Well, if
you decide to sell your home, the buyer can
assume your mortgage (rate, repayment period,
current principal balance, and any other terms
in the existing loan). Although the process
could be a tedious one, it is doable if it makes
sense for both buyer and seller and of course if
both can meet the guidelines.

The One Disadvantage of FHA Loans

Finally, don't forget the insurance premiums. That is a standard 1.75%. It can be added to your loan, but it will increase your loan by $1750 dollars on every $100,000 of the purchase price. It does not matter how much your down payment is or anything else. That charge will be there.
You must carry insurance for as long as you have the FHA loan and own the home. While some private mortgages allow you to drop it after a certain percent of the loan has been repaid, it's not that way with an FHA loan or an FHA refinance, according to FHA.com.

All loans, like all buyers,
aren't made equal. Do your re-search before you
decide on what loan you want to pursue. But if
any of the aforementioned is a worry in your
mind as to why you think you cannot purchase a
home, an FHA might be right for you. Good luck
in your home purchase journey. You have to pay the mortgage insurance up front. Peak Home Loans can help you on your home refinance. With many new tools available, such as FHA Express, Peak Home Loans knows the way to help you get your dream home or your best, most affordable new payment. We are here to help.